Funding first flip
Member since 2024 · 2 posts · 3 votes
Funding first flip
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
2yMy first flip was funded entirely by private money lenders (people I knew). Funding with hard money for your first time will cost you your right arm and first born. It will be an extremely risky proposition and likely end up in failure. Your first is already risky enough since you lack experience, combine that with 100% funding and the risk is through the roof. That said, it can be done and done successfully if you plan in advance, build your team (contractors, subs, back ups, lenders, credit with suppliers, escrow/title, real estate attorney, mentor, etc.) get educated on finding (marketing) for deals, rehab costs, locations, market data (like crime rates, school ratings, population growth, job growth, etc), specific market insights like what is most popular and sells for the most in your area, etc
16 Replies
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
you will need some of your own cash - there is no way around it and borrowing 100% is high risk.
also - not to discourage you, but to help you - flips are tougher than as portrayed on HGTV. there are costs at every step - costs to buy, costs to hold and costs to sell. with the market flat, contractors booked up, materials expensive and tremendous competition for deals it is very, very difficult for a new investor at this time.
i've used hard money and also bought with cash and then financed the rehab.
- Lender · Boston, MA · Member since 2023 · 415 posts · 95 votes2y
Hello,
Depending on the deal and your FICO, some hard money lenders will lend you up to 90% of the purchase price + 100% of the rehab, but more commonly, 80/100. To make up the difference, some investors bring on equity partners or use HELOCs. - Albuquerque, NM · Member since 2017 · 81 posts · 13 votes2yFirst flip maybe challenging and risky. If you have equity in your primary residence, a HELOC can be a great option. It allows you to borrow against the equity you’ve built up. Using your non-retirement savings is another route. Just make sure you maintain a financial cushion for emergencies.
Quote from @Liliana Gala:
I’m curious to know how you funded your flip deals, especially the first flip (or first few) as you’re getting started??
I found a single family home that I’m interested in as a flip. I have equity in my primary residence and some non retirement savings (but hesitant to dip into that… ) Interested in hearing your responses!!
There are hard money and private lenders that can offer you short term loans for the purchase price and rehab. If you need more help , just shoot me you number and I'll be glad to assit you. - Real Estate Broker · Nationwide · Member since 2024 · 6 posts · 1 vote2y
Shop around for the best financing options that suit your needs. Cash on hand is especially useful if you're first deal.
- Lender · PA · Member since 2019 · 535 posts · 461 votes2y
Quote from @Liliana Gala:
I’m curious to know how you funded your flip deals, especially the first flip (or first few) as you’re getting started??
I found a single family home that I’m interested in as a flip. I have equity in my primary residence and some non retirement savings (but hesitant to dip into that… ) Interested in hearing your responses!!
Hi Liliana, All of the previous opinions are valid. Fear is the primary reason that people do not get involved in real estate flipping. Fear can be overcome by knowledge and planning. A first-time flip using a rehab loan will require a minimum of 15-20 percent down from a lending company. You will also need to show some reserves. During your due diligence, you should connect with a mortgage broker, realtor, and contractors to gather enough information to make an informed decision. You should find a reliable rehab calculator and learn how to use it to evaluate the true profitability of your flip. Some people complain that this market makes it tough to flip and others flip for profit. Which one are you?
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes2y
My first flip was funded entirely by private money lenders (people I knew). Funding with hard money for your first time will cost you your right arm and first born. It will be an extremely risky proposition and likely end up in failure. Your first is already risky enough since you lack experience, combine that with 100% funding and the risk is through the roof. That said, it can be done and done successfully if you plan in advance, build your team (contractors, subs, back ups, lenders, credit with suppliers, escrow/title, real estate attorney, mentor, etc.) get educated on finding (marketing) for deals, rehab costs, locations, market data (like crime rates, school ratings, population growth, job growth, etc), specific market insights like what is most popular and sells for the most in your area, etc
- Real Estate Consultant · Member since 2024 · 39 posts · 5 votes2y
Hi Liliana,
Great to hear that you’ve found a potential flip! I totally understand the hesitation to dip into your non-retirement savings—that’s a common concern for many first-time flippers.
For my first flip, I leveraged private money funding. It allowed me to preserve my personal savings while still securing the capital I needed to get the project going. Private lenders typically offer more flexibility than traditional financing, which is great when you're just starting out. You can often secure a loan based on the property's value rather than your financials, making it easier to get approval quickly and move on deals like the one you found.
Using private money can help you fund the purchase and the rehab costs without tapping into your home equity or savings, which gives you more breathing room and allows you to focus on the project.
If you’re interested, I’d be happy to walk you through how private money lending works and how it could help with your current deal. Let me know if you’d like to chat!
Best,
Carole - Real Estate Coach · Miami, FL · Member since 2024 · 1k+ posts · 484 votes2y
Great question Liliana!
Funding that first flip can be challenging, but there are several ways to approach it. Since you have equity in your primary residence, a home equity loan or HELOC (home equity line of credit) might be a smart option. This lets you access your home's value without touching your savings, and the rates are typically lower than what you'd get with a hard money loan.
Many first-time flippers also turn to hard money lenders, who focus on the property’s value and the flip's potential rather than your personal credit. While these loans come with higher interest rates, they are generally faster to secure and more flexible. Another common route is borrowing from private lenders—whether friends, family, or other investors in exchange for a return on their investment, though you should always ensure everything is clearly agreed upon in writing.
If you're hesitant to use your savings, a HELOC or hard money loan might be your best bet for accessing the capital you need without dipping into your reserves. Just make sure your numbers are solid, taking into account renovation, holding costs, and any unexpected expenses, to ensure a profitable flip.
If you'd like more help with funding options or analyzing your deal, feel free to reach out. Best of luck with your flip!
Best regards,
Drago - Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes2y
So, I say go in reverse. Ask yourself how much capital can you raise for your first flip? That number really depends on what/where/how of the deal. If you say the most you can get is 25k, then you really need a lender who will go maybe 85% possibly 90% on the front leverage and you'd have to be in a market where the sale price is under 100k.
Lots of times the starting capital of the investor does not match with their home market.
The key for funding the first deal, and I have secured financing for the first deals of at least 10 investors, it has to be a good deal. What is a good first deal...
1) Project cost is less than 72.5% of the ARV, under 70% is really good
2) The Rehab should be no more than 75% of the purchase price
3) Borrower's credit mid 700s
4) Total loan amount under 200k
That is a cookie cutter first deal and in those scenarios I have gotten 90% of the purchase for first time investors/borrowers.
- Real Estate Broker · Member since 2019 · 77 posts · 19 votes2yFunding your first flip can definitely feel daunting, but there are several options to consider.
Quote from @Liliana Gala:
I’m curious to know how you funded your flip deals, especially the first flip (or first few) as you’re getting started??
I found a single family home that I’m interested in as a flip. I have equity in my primary residence and some non retirement savings (but hesitant to dip into that… ) Interested in hearing your responses!!
Here are a few strategies that might help you:
* Traditional Financing
* Hard Money Loans / Private Money
* Partnerships
Ultimately, the right choice will depend on your comfort level and financial situation. Best of luck with your flip, and feel free to reach out if you have more questions! - Lender · Kingsville, MD · Member since 2023 · 103 posts · 35 votes2y
Quote from @Liliana Gala:
I’m curious to know how you funded your flip deals, especially the first flip (or first few) as you’re getting started??
I found a single family home that I’m interested in as a flip. I have equity in my primary residence and some non retirement savings (but hesitant to dip into that… ) Interested in hearing your responses!!
Hey Liliana,
Great question here. I find that most of the investors I work with always utilize hard money. The reason being is that their own funds are still secure and not tied up in the deal. I would say the biggest factor though would be scalability. Leveraging other peoples money allows you to scale you much faster and safer.
- Virginia Beach, VA 23452 · Member since 2024 · 88 posts · 14 votes2y
Quote from @Liliana Gala:
I’m curious to know how you funded your flip deals, especially the first flip (or first few) as you’re getting started??
I found a single family home that I’m interested in as a flip. I have equity in my primary residence and some non retirement savings (but hesitant to dip into that… ) Interested in hearing your responses!!
I agree with the others. You have several options. You just have to weigh the risks and choose whichever you are confident with. Good Luck!
- 2yNoah WrightBusiness MemberUSA, Nationwide · Member since 2024 · 424 posts · 142 votes
Hey Liliana! Funding your first flip can be a bit daunting, but there are several options to consider. Here’s how I and others have approached it:
- Home Equity Line of Credit (HELOC): Since you have equity in your primary residence, a HELOC could be a great option. It allows you to borrow against your home's equity, often at lower interest rates than other financing options. Just make sure you're comfortable with the repayment terms.
- Cash Savings: If you’re hesitant to dip into your non-retirement savings, try to assess whether you could use a portion of it for the flip while keeping enough for emergencies. Sometimes, a calculated risk can pay off in the long run.
- Hard Money Lenders: These are short-term loans specifically for real estate investors. They can provide quick access to cash but often come with higher interest rates. This option is popular for those who need fast funding for a flip.
- Partnerships: Consider teaming up with someone who has capital but may not want to manage the flip themselves. You could bring in your expertise while they provide the funds.
- Seller Financing: Depending on the seller’s situation, they may be willing to finance part of the purchase, which can ease the burden of upfront costs.
- Private Investors: If you have a good network, you might find individuals who are interested in investing in your project. Presenting a solid business plan can help you secure funding from private sources.
Whichever option you choose, make sure to run the numbers on the flip to ensure it’ll be profitable. Good luck, and I’m excited to hear more about your journey!
- Lender · Sanford, NC · Member since 2024 · 359 posts · 123 votes2y
If you're hesitant to dip into savings, hard money can help without draining your personal funds. Just make sure you have enough reserves for unexpected costs—rehab always ends up pricier than planned, and you don’t want to run out of cash mid-project. Be prepared for things like carrying costs, permits, and any surprise repairs that come up. It’s all about balancing the funding so you’re not caught off guard when costs inevitably rise.
Hard money lenders are often a good option because they’re specifically geared toward short-term investments like flips. As you get more experienced and build relationships with lenders, you'll likely be able to secure better terms. The first few deals are about learning the process and getting comfortable with the risk, so make sure the numbers work before you move forward. This will help you avoid any surprises that could drain more of your equity or savings than you intended.
- 1dErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Hey Liliana,
There are many Fix and Flip lenders that lend to first time flippers.
You can expect up to 90 LTV and 100% of the rehab financed on light cosmetic deals with a high FICO
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